You and your business partner aren’t married to each other (and never will be), so why on earth should a prenuptial agreement be required before either of you tie the knot?
It’s simple: You can’t rule out the possibility of love and marriage for either you or your business partner someday. As a result, you cannot rule out the possibility of a bitter, hard-fought divorce someday in the future.
When a business partner’s marriage goes down in flames, so can their business – unless the proper protections are in place.
How does a prenup protect your business?
When a couple marries, anything not set aside by a prenuptial agreement can end up becoming part of the “marital pot” of assets – and that includes your partner’s share of the business. It’s entirely conceivable that, once the divorce is settled, your partner’s spouse could end up holding all or part of that share. If you don’t fancy the idea of having some unknown person as your business partner in the future, a prenup is can help.
In addition to protecting your business from third-party intrusions, a prenup can also protect your business from unnecessary interruptions during your partner’s divorce. If their share of the business is considered a marital asset, there will be questions about the company’s value. That means opening up the books and providing all kinds of documentation, which can be both a financial drain and a burden on your time.
Prenups aren’t meant to create problems. Instead, they anticipate them and try to find a balanced solution that meets everyone’s needs. If you’re in the process of drafting a partnership agreement, don’t forget to put the idea of a prenup on the table.